Council terminates agreement with PBID after organization loses nonprofit status
The City Council Wednesday had to terminate its five-year agreement with the Downtown Property Based Improvement District because the organization lost its corporate nonprofit status last year.
The PBID was created by the City in 2006 to provide public services in downtown Morgan Hill that go “above and beyond” the City’s basic level of service, according to City staff. These services are mostly infrastructure related and have included the purchase and installation of benches, maintenance of sidewalk planter boxes, installing holiday lighting on Monterey Road and banners and flags on light posts for special events.
The district has been funded by the downtown property owners themselves – including the City – who assess a parcel tax on themselves to fund the downtown improvements. The district raised about $51,000 last year, but now that the Internal Revenue Service has revoked the PBID’s nonprofit status there will be no assessment for the 2013-14 fiscal year, according to City staff.
Now the City will hire a certified public accountant to conduct an audit of the PBID’s remaining funds, and seek a different nonprofit to run the district and keep its planned activities going, City staff said. The City may legally only work with nonprofit corporations in the administration of PBIDs.
The PBID lost its nonprofit status in 2012 due to an accounting error – an accountant hired by the PBID to manage its finances failed to file annual paperwork required in order to renew and preserve the nonprofit standing, according to PBID board member Majid Bahriny.
“Now we are in the process of redoing that, and until we do we will have to put everything on hold,” Bahriny explained.
The IRS also told the PBID that it owes back taxes for 2012 – the year it was not listed as a nonprofit – but Bahriny said they should be able to regain the status retroactively, which would lower or eliminate that tax burden.
The downtown area has benefited significantly, at no cost, from the PBID, according to City staff. The City does not have the funds to continue the services the PBID has provided.
“The PBID is a tremendous asset to the community,” Morgan Hill Economic Development Manager Edith Ramirez said. “It provides added services to this district that otherwise wouldn’t be provided because the city couldn’t afford to.”
Council approves union contracts
The Council also voted to approve new two-year contracts with two of the three unions who represent City employees Wednesday.
Both agreements require the individual employees represented by those unions to pick up more of the cost of their CalPERS retirement benefits, according to City staff.
The agreements are with the 13-member Community Service Officers Association (which represents non-sworn public safety personnel), and the 80-member American Federation of State, County and Municipal Employees.
Both contracts began retroactively on July 1. Both agreements give the employees a 2-percent raise for each of the two years, and require the employees to split the City’s share of annual CalPERS rate increases equally.
The agreement with AFSCME also requires members of that group to pay their full employee’s share of CalPERS costs, which is 8 percent of their salaries. Until now, the City has paid 7 percent of that cost, asking the employees to only pay the remaining 1 percent.
The AFSCME contract also gives those employees a 7 percent raise to compensate for their additional PERS contributions.
The Council has already approved an agreement with the Police Officers Association.
All three employee agreements strive to meet the Council’s and City Hall’s long-term goal of reducing the taxpayers’ burden for public employees’ retirement benefit costs, according to a City staff report.
